Monopoly

‘alone to sell’ Market

 In a monopoly market, there is a single seller of a particular product
with no strong competition from any other seller.

FEATURES OF A
MONOPOLY MARKET EXAMPLE OF MONOPOLY
MARKET
• SINGLE SELLER OF
THE PRODUCT • INDIAN RAILWAYS
• ENTRY • GOOGLE
RESTRICTIONS • PATENTS
• NO CLOSE • FACEBOOK
SUBSTITUTES
• PRICE MAKER
• MICROSOFT
 Features of a Monopoly Market
1. Single Seller of the Product 2. Entry Restrictions
In a monopoly market, usually, there is a single firm Another feature of a monopoly market is
which produces and/or supplies a particular product/
restrictions of entry. These restrictions can be of
commodity. It is fair to say that such a firm constitutes
the entire industry. Also, there is no distinction between any form lik economical, legal,
the firm and the industry. institutional,artificial, etc.

3.No Close Substitutes

Usually,amonopolistsellsa product which does not have
any close substitutes. Therefore, the cross elasticity of
demand for such a product is either zero or very small.
Also, the price elasticity of demand for the
monopolist’s product is less than one. Hence, in the
monopoly market, the monopolist faces a downward
sloping demand curve.
4. Price Maker
Since there is only one firm selling the product, it
becomes the price maker for the whole industry.
The consumers have to accept the price set by the
firm as there are no other sellers or close
substitutes.

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 Advantages / Disadvantages
of monopoly market
Advantages
▸ 1. Stability of prices
▸ In a monopoly market structure, the prices are pretty
stable. This is because there is only one firm involved in
the market that sets the prices since there is no
competing product. In other types of market structures
prices are not stable and tend to be elastic as a result of
the competition.
▸ 2. Economies of Scale
▸ Since there is a single seller in the market, it leads to
economies of scale because of large-scale production
which lowers the cost per unit for the seller. The seller
may pass this benefit down to the consumer in terms of
a lower price.
▸ 3. Research and Development
▸ Since the monopolist is making abnormal or
supernormal profits, the firm can invest that money
into research and development. Customers may get
better quality products at reduced prices leading to
enhanced consumer surplus and satisfaction.
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Disadvantages
▸ 1. Higher Prices
▸ The monopolist could set a very high price for
the product leading to the exploitation of
consumers as they have no option but to buy it
from the seller due to the lack of competition in
the market.
▸ 2. Price Discrimination
▸ Monopolists can sometimes use price
discrimination, where they charge different
prices on the same product for different
consumers. This depends on market
conditions.
▸ 3. Inferior Goods and Services
▸ The lack of competition may cause the
monopoly firm to produce inferior goods and
services because they know the goods will sell.
examples from Indian Economy.
Indian Railway Catering and Tourism Corporation (IRCTC)

Hindustan Aeronautics Limited (HAL)

Imperial Tobacco Company of India Limited (itc)

bharat Heavy Electricals Limited (BHEL)

coal india

Hindustan zincs

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 Railways
Public services like the railways are
provided by the government. Hence,
they are a monopolist in the sense
that new partners or privately held
Companies are not allowed to run
railways. However, the price of the
tickets is reasonable so that public
transport can be used by the
majority of people.